THE BULLS ARE POINTING TO THE FACT THAT THE LAST FOUR MONSOONS HAVE BEEN GOOD, SO BY THE LAWS OF AVERAGE, THE COUNTRY IS DUE A POOR ONE.
prices have continued to fall over the past six months. However, the banning of the use of neonicotinoid pesticides on beet has deterred farmers, especially in France where the planted area has been cut. Nevertheless, with soil moisture levels good once the beet is established it should develop well assuming the record summer temperatures witnessed last year are not seen this year. Some medium sized producers are see-sawing in production but unlikely to impact the production/ demand equation.
Demand Demand, which is more difficult to determine than production has, undoubtably improved over the past six months. End-users have destocked during COVID then baulked at the idea of holding stock as interest rates soared - found themselves under bought and paid the price. Global stocks remain very low which has resulted in the recent tightness in the physical markets especially after India curtailed exports after six million tonnes. There has been some debate on whether recent high prices will impact on consumption. So far no evidence but, historically, sugar consumption is fairly inelastic and only is impacted once raw prices breach 30 cents. On the negative side port congestion in Brazil could delay sugar exports as they compete with corn and soya shipments. However, firstly the sugar will, eventually, be shipped and secondly end-buyers have been aware of this particular problem for many months. Finally, China has not, as yet, bought significant quantities of sugar as some had expected. There would appear several reasons. Firstly, prices are too high and
they would prefer to use existing stocks, secondly, a Government decree has suggested the country need to be more self-sufficient in raw products. However, some suspect smuggling has resumed which is boosting internal supply.
The next few months will probably determine whether the highs seen back in April are revisited. The Brazilian harvest is now running in top gear. The last Unica data showed near record sugar production for the first half of May with 48% of cane being used for sugar production which is about the maximum. So now monsoon weather prospects across India and then Thailand will become the focus. While the majority of analysts see a global production surplus for 2023/24 it is by no means a given.
Physical tightness looks likely to persist for the time being which should act to support prices. While prices may struggle to breach the 11 year highs it would seem unlikely prices will drop back too far while uncertainty continues to stalk the market.
Howard Jenkins E:
howard.jenkins@
admisi.com T: +44(0) 20 7716 8598
HISTORICALLY, SUGAR CONSUMPTIONIS FAIRLY INELASTIC AND ONLY IS IMPACTED ONCE RAW PRICES BREACH 30 CENTS.
11 | ADMISI - The Ghost In The Machine | Q2 Edition 2023
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